Despite a good-news warm-up, Treasury auction ends sloppily

August 13, 1993|By New York Times News Service

NEW YORK -- It could not have been a better warm-up for a Treasury auction.

The producer price index for finished goods in July fell two-tenths of 1 percent, and retail sales came in up just a barely noticeable one-tenth of 1 percent.

This left the Treasury selling 30-year bonds at a time when new data reassured traders, investor and speculators that inflation was in check, and that economic growth would not pick up enough to awake worrisome inflationary fears any time soon.

Add the fact that the Treasury is cutting its annual sales of 30-year bonds by 40 percent and it seemed that yesterday's auction of the 30-year bonds should have gone well.

It did not.

Traders, investors and speculators suffered a little indigestion as they bought the last $11 billion of the week's record $38.5 billion sale of three- , 10- and 30-year securities. It appeared that dealers wound up with more 30-year bonds at a price higher than they could stomach, so they started selling.

The sloppy auction put a chill on the long end of the market in the afternoon. The price of the old 7.125 percent 30-year bond due in February 2023 rose more than half a point after the inflation report and the yield on the new bond in pre-auction trading slipped to 6.30 percent.

But by late trading, the yield on the new 6.25 percent, 30-year bond due in August 2023 was up to 6.36 percent while that of the old bond was up to 6.44 percent, from the 16-year low of 6.42 percent set on Wednesday. Prices and yields move in opposite directions.

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